April 27 (Bloomberg) -- Tokyo Electric Power Co., the
company at the center of the worst nuclear crisis since
Chernobyl, isn’t likely to be downgraded to BBB+ by Japan Credit
Rating Agency Ltd., as the government bailout bolsters its
business, according to BlackRock Inc.

Tokyo Electric, known as Tepco, plans to deliver a business
restructuring plan this month as the company may face 4.5
trillion yen ($56 billion) in compensation payments by March.
Companies need at least one risk assessor to give them a grade
above BBB+ to stay in the Nomura Bond Performance Index, which
is used by most major Japanese pension funds. Tepco’s sole
foothold is JCR, which rates it A.

“I can’t say the chances are zero, but we think it won’t
happen,” Kunihide Takeuchi, a Tokyo-based fund manager at
BlackRock, said of a possible ratings cut by JCR, because it
takes into account outside support for the utility. Tepco’s
“national economic significance” means it will receive
government funding and bank loans, Takeuchi, who oversees 100
billion yen of bonds at BlackRock, said in an April 24 interview
in his Tokyo office.

The extra yield investors demand to own Tepco’s 100 billion
yen of notes due May 2013 rather than government debt averaged
about 564 basis points this month, according to Japan Securities
Dealers Association prices. The spread tightened from a record
964 basis points, or 9.64 percentage points, on Oct. 27, JSDA
prices show.

Bond Index Rules

The yield premium was 10 basis points on March 10, a day
before the quake that crippled Tepco’s Fukushima Dai-Ichi
nuclear power plant.

Nomura Holdings Inc., Japan’s biggest brokerage, estimates
that as much as 80 trillion yen of so-called passive investment
funds link their performance to its index. Many of those funds
wouldn’t be able to own Tepco’s debt if it was removed from the
measure. The ratings rule applies to grades from Standard &
Poor’s, Moody’s Investors Service, Japan’s Rating & Investment
Information Inc. and JCR, according to the index criteria.

BlackRock is holding Tepco bonds with shorter maturities
“to the extent that it wouldn’t cause trouble to our clients,”
Takeuchi said. “Tepco bonds still have value” because the
government will bail the company out, he said.

The power company requested 1 trillion yen from a
government-backed fund to compensate people affected by the
nuclear disaster, President Toshio Nishizawa said in a news
briefing last month. The utility may face insolvency if its
capital keeps falling, he said.